Sars warning takes toll on ebookers forecasts

The online travel company ebookers yesterday admitted the travel market was taking longer to shake off the Sars virus than expected, warning of slack demand to countries such as Canada, Hong Kong and Singapore.

The alert, which will hit profits in the company's most important quarter, prompted analysts to slash full-year forecasts. Numis Securities cut its pre-tax profit numbers by more than one third, to £7.5m.

Dinesh Dhamija, the company's founder and chairman, said he was confident the problem would not last beyond August. "Whenever [the weather here] is good, you are going to have people wanting to put off travel plans," he said.

Ebookers also announced plans to more than treble the size of its Indian back-office and call-centre business, creating 1,500 jobs. It plans to capitalise on the growing trend for companies to outsource administrative operations or call centres.

Mr Dhamija said he hoped to have "one or two" clients installed by the end of the year in a move that would "conservatively add an annualised £8.5m to our bottom line next year". He added: "We want to show people we are not overvalued but undervalued if you take our business process outsourcing [BPO] facilities into account. That's the future." The four BPOs listed on New York's Nasdaq exchange trade on multiples of between 23 times and 33 times earnings, he added.

Ebookers estimated that its Indian office, which currently employs some 640 staff, saved it £1.4m in its second quarter. It said the savings could rise to more than £2m per quarter by the end of the year once it had finished integrating its Travelbag acquisitions, the bricks-and-mortar travel agent it bought in January. The 62,000 square feet of extra space in New Delhi will be ready for use in November, Mr Dhamija said.

Analysts at Numis said "recent world events and the subsequent fall in travel demand for [long- and mid-haul destinations] has reaffirmed our concern about ebookers' market positioning towards those destinations".

Ebookers said a pick-up in the peak autumn to winter booking period should ease the current slump in long-haul bookings. The company said pre-tax losses for the six months to 30 June had swelled to £12.3m against £7.05m, including acquisition costs and related fixed asset write-downs.